How Companies Set Salaries for Remote Jobs
As employers consider making remote work options permanent, the workplace is undergoing a seismic transformation. While it’s well recognized that remote work presents businesses with fantastic prospects, it also presents certain difficulties.
One of the important queries during the hiring process when creating a worldwide distributed team is, “How do I determine the compensation for my remote workers?”
PayScale has just released a new study report and strategy guide on this subject.
How to set compensation for remote workers
The abilities, experience, industry, and job level of an employee are only a few of the variables that affect pay. Businesses must consider the remote work factor when employing new members for their international teams. They employ three different ways to accomplish this.
1. Set salaries for remote employees according to the company location
Calculating compensation following your company’s headquarters location is one method of setting pay for remote workers. This means that regardless of whether the employee lives in the area, you pay all of your employees by the legal criteria.
The pros:
- Pay equity. Equal compensation for equal effort is guaranteed by this technique, which could improve employee performance because your staff will feel appreciated for the contribution they bring to the business.
- Talent attraction. Suppose your business is located in an area where salaries are typically higher than in other parts of the country or continent, such as the European Union, and you hire people there. In that case, you may be able to attract the best talent in the market by providing a competitive compensation package.
The cons:
- Expensive: If you want to go remote to save money, this probably isn’t the best choice.
2. Calculate pay for remote workers based on employee location
Setting pay for remote employees in line with where they live is another tactic that has recently drawn much media attention. When referring to globally scattered teams, employees who live in less expensive regions of the country or nations with lower living costs earn less than their coworkers who must contend with higher living costs.
Companies that hire people from all over the world must equally consider the location of their new hires when determining their compensation. Data from Arc suggests the typical rates per year (in USD) as follows for a remote developer’s pay:
- Germany: $72,900
- France: $74,299
- Italy: $60,238
- Spain: $68,216
- United Kingdom: $72,177
- United States: $96,999
- Hungary: $59,796
- India: $48,918
The pros:
- This method of determining remote workers’ salaries is less expensive than paying all employees according to where your headquarters are located, which could help you save a lot on employment expenditures.
- Favorable workers who reside in more costly places may enable your business to attract high-performers even though your headquarters are located in a region with a talent scarcity.
- Encourages beneficial life changes: When provided location-based pay, remote workers may choose to relocate to less expensive, more rural areas, improving their work-life balance and productivity in the long run.
The cons:
- Fairness: If individuals with comparable talents and experience are paid differently, there will likely be complaints of unfair treatment.
- Demands a lot of work: When creating a worldwide team with employees in many nations, calculating each employee’s wage individually based on their location can be quite a lot of work – far more than simply setting a baseline based on corporate location.
3. Pay remote workers according to a national median
Last but not least, employers might decide to set remote worker salaries under current industry trends. The only thing your HR department needs to do in this situation is to monitor international trends continuously.
The pros:
- It’s simple; all you need to do is look at how salaries are changing for various positions and industries and the average pay rates.
- Modestly appealing: This remuneration plan can reach more talented people than a location-based one does if your headquarters are located in a less expensive area.
The cons:
- The major issue with basing remote employee pay on the national average is that the average is just average. You’ll probably have to pay more to draw in top talent.
How to set salaries for remote employees: key takeaways
- Many large corporations have declared pay reductions for remote workers moving to less expensive regions, implementing a location-dependent strategy for remote labor compensation. It’s crucial to weigh the advantages and disadvantages of each method and match it with your company’s compensation philosophy and values when choosing a compensation strategy for your remote workers.
- According to recent data, remote employees make more money on average than their coworkers who work in an office.
- It is more critical than ever to determine remuneration for remote workers as geographic barriers to talent pools become less and less of an obstacle to hiring the best talent available.
Why it’s important to know how to set salaries for remote workers
Many large corporations have declared pay reductions for remote workers moving to less expensive regions, implementing a location-dependent strategy for remote labor compensation. It’s crucial to weigh the advantages and disadvantages of each method and match it with your company’s compensation philosophy and values when choosing a compensation strategy for your remote workers.
According to recent data, remote employees make more money on average than their coworkers who work in an office. It is more critical than ever to determine remuneration for remote workers as geographic barriers to talent pools become less and less of an obstacle to hiring the best talent available.
How much do remote workers make?
The location of remote workers affects how much they are paid. In the US, the national median compensation for remote workers is $48,500 per year, which is marginally more than the national median pay for non-remote workers, both generally speaking and for individuals performing the same job.
How to handle global payroll?
It’s time to consider how to pay your remote employees now that you understand how to determine their salary. Paying employees can be difficult, particularly for businesses with a global workforce. Most businesses find it difficult to make decisions on compensation management, and remote work might present additional difficulties.
Despite this, companies should still implement remote work practices and broaden their talent pools. Any business can create equitable and alluring remuneration structures for the remote workforce and maintain its position as the employer of choice with a little strategic thinking and a defined mindset.
Conclusion
When setting remuneration for remote workers, the approach will change depending on the sector, company, and position. Businesses will probably require expert advice on how to determine remote worker pay and will need to match their compensation strategy to their overall philosophies.
Although some businesses will base compensation on the employee’s location, others may discover that basing pay on national averages or the location of the company’s headquarters is more in line with their talent sourcing and retention strategy.
Regardless, the majority of businesses that implement permanent remote working environments will be able to offer employees more opportunities and job flexibility.